Aetna Inc on Wednesday said it expects to eliminate roughly 1,250 jobs by the end of March 2010, reflecting weak economic conditions and the potential impact of health care reform.

The third-largest U.S. health insurer said it is cutting about 625 jobs now, and expects to make a similar number of cuts by the end of the first quarter. Such cuts would reflect about 3.5 percent of its 35,500-person workforce.

Aetna also said it expects to merge some field offices, but is not exiting any markets as a result.

The Hartford, Connecticut-based company expects to incur a $40 million after-tax charge, including $12 million for the initial job cuts and $28 million to consolidate real estate leases. It expects to disclose the financial impact of the remaining job cuts later.

Aetna last month said it may shed as many as 650,000 members in the first quarter of 2010, as it tries to raise premiums to cope with increasing medical costs.

Like rivals, Aetna might also have to cope with a possible health care overhaul now being considered in Congress. This could result in new customer rebates, curbs on rate hikes and the creation of a competing government-run plan.

The economic downturn has had a significant impact on our customers, Chief Executive Ronald Williams said. In addition, we must prepare for the impact that health care reform and regulatory changes may have. Streamlining our business now will enable us to improve our competitiveness and redirect resources to areas with a greater potential for future growth.

Aetna last December announced plans to cut 1,000 jobs, also citing the economy. While third-quarter profit rose 18 percent, Aetna said flu-related medical costs could weigh on fourth-quarter results.

WellPoint Inc , the largest U.S. health insurer by membership, in September said it was weighing job cuts in light of possible enrollment declines.

Shares of Aetna closed Wednesday down 6 cents at $29.21 on the New York Stock Exchange.

(Reporting by Jonathan Stempel; editing by Carol Bishopric)

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